Old home savings contract - what should you do with it?

The special repayment of a "loan for residential construction purposes" aka construction loan can often also be seen as a residential use of the [BSP]. I would discuss this with the bank. So fully save up, have it paid out without using the loan, and make a special repayment on the construction loan.

As long as you use the saved money for housing construction, the entitlement to the housing construction premium remains. The only important thing for this is proof that it was actually used for the construction project. You might want to talk to the respective banks (building savings contract and loan) about this. Under no circumstances accept the loan. If it is possible for you, of course you can continue to save it. Perhaps capital-forming benefits or similar can also be applied, which would make maintaining it worthwhile. However, you would need to find out how the bonus interest works and what the conditions are if you fully save it. In this case, however, the housing construction premium is lost if you do not reinvest the paid-out money for housing construction (e.g., garage, extension, renovation, etc.). So if you plan to build the garage only in a few years or expand the attic later, you could also use the building savings contract money for that. I find it hard to believe that you would really get a better interest rate for the total loan due to the small amount of 15,000€. That is "only" 4% of the sum and should technically also be secured by the house (at least the almost 8,000€ loan). Unfortunately, I lack practical experience whether a bank would actually allow such an amount to be registered in the land register (provided the building savings bank and the loan bank are not identical).

don't forget the compound interest if you don't take the loan. That's easily 1-2% on TOP retroactively

You have to calculate it ;-). (If you know all the conditions.)

That's "only" 4% of the amount and should actually be legally secured by the house (at least the almost €8,000 loan). Unfortunately, I lack practical experience whether a bank would actually allow such an amount to be registered in the land register (provided the building society bank and the credit bank are not identical).

Building savings loans up to €30,000 are usually unsecured loans (i.e., without collateral). Whether the interest rate of the main loan becomes cheaper sometimes depends on just a few percentage points, if you are just above or below the threshold values (e.g., 100%, 90%, 80%, and 60%) of the loan-to-value ratio. Sometimes the building savings credit balance alone is enough.

Roughly calculated:
€380,000 loan x 1.8% interest = €6,840 interest in the first year

If, by using the building saver, you only had to take out €365,000 and perhaps pay only 1.75% interest, that would be €6,387.50 interest in the first year.
Adding the interest on the building savings loan (€7,700 x 4.25% interest) amounts to €327.25.
This results in a savings of €125 in the first year.
Fairly, one would have to offset the lost interest income against this.

With free funds, the building savings loan could be repaid first, thus even increasing the interest savings in the following years.

The calculation doesn’t quite add up because you are calculating with a constantly fixed interest rate. With an annuity loan, this already decreases from month 2 on, as do the interest payments. The theoretical savings are therefore smaller and decrease further in the following years. The interest advantage would only apply if you actually repay the building savings contract earlier through special repayments. However, as you have correctly noted, the interest earnings in the building savings contract are not taken into account. The processing fee is deducted there, but with only 1.5%, that is still 115€. Of the calculated 125€, only 10€ remain. From year 2 on, it is probably no longer worthwhile because the credit interest increases and the loan interest decreases.

Your entire calculation is, however, a naive calculation because you assume that the borrower needs €15,000 less loan. But there are already €7,300 in the building savings contract, which remains as credit balance, whereas you fully include this in your "combo package" and take out "only" an additional €7,700. So you compare a loan of €380,000 (1.75% + 4.25%) with a loan of €387,700 (1.8%). Calculating the €7,700 at 1.75% results in €134, so your proposal is at least €10 more expensive even under these optimistically considered conditions.

Of course, if the loan interest rate can be reduced significantly, it will inevitably become attractive at some point. In our case, the jump from full financing down to 85-90% (depending on the bank) was quite large. However, below 80%, there was not much left.

But the calculation doesn’t quite add up because you’re calculating with a constant interest rate. With an annuity loan, it already decreases from month 2 onwards, and so do the interest payments. The theoretical savings are therefore smaller and decrease even further in the following years.

The calculation is simplified, which is why I wrote “roughly calculated.” Since the building savings contract is usually paid off faster than an annuity loan, the interest advantage even increases. You just have to make sure when calculating that the total installment remains comparable.

But as you correctly pointed out, the interest earnings in the building savings contract are not taken into account. Although a processing fee is deducted, with only 1.5% that still amounts to €115. Of the calculated €125, only €10 remain. From year 2 onwards, it probably no longer pays off because the credit interest increases and the loan interest decreases.

If you want to calculate precisely, then also take into account capital gains tax + solidarity surcharge on the credit interest. Furthermore, the effect improves due to the different repayment rates in the following years, not worsens.

But your entire calculation is a naive calculation since you assume that the original poster needs €15,000 less loan. But he already has €7,300 in the building savings contract, which remains as credit balance, whereas you fully include this in your "combo package" and take out only €7,700 additionally. So you compare a loan of €380,000 (1.75% + 4.25%) with a loan of €387,700 (1.8%).

No, I always calculate with €380,000. Either €380,000 loan and then keep credit interest on the building savings balance of €7,300, or €365,000 + €15,000 (of which €7,300 is credit balance and €7,700 financing).

There is a third option: having the balance paid out and then borrowing €7,300 less. If the loan-to-value threshold is undercut by the €7,300, then this is probably the most sensible option.

However, I wanted to illustrate with my calculation that under certain circumstances even the building savings loan can make sense.

If the loan interest rate can of course be reduced significantly, then it will inevitably become attractive at some point. For us, the jump from full financing to 85-90% (depending on the bank) was quite large. Under 80% there wasn't much left.

Exactly that was my intention to show that even only a 0.05% interest improvement improves the overall financing, although you have to pay over 4% for the building savings loan. The greater the interest improvement, the more sensible the option is.